Legitimacy – 10 things any business should do

Jean-Jacques_Rousseau_(painted_portrait)

Legitimacy – 10 things any business should do

“The strongest is never strong enough to be always the master, unless he transforms strength into right, and obedience into duty.”

–  Jean-Jacques Rousseau (1762)

My book on the “Social License” defines the social license concept in relation to three foundational principles: legitimacy, trust and consent. It is the first of these three that is perhaps the most fundamental and hence the subtitle to the book: “How to keep your organisation legitimate”. The word does not appear in many CEO speeches but this does not mean that legitimacy is something not considered by clever business strategists, it is.

I won’t get into the definitional issues on this blog, but I do go on to explore three permutations of the legitimacy relating to both organisation and a specific activity (a little in the way Donald Rumsfeld once talked about knowledge). Organisations might have their own legitimacy but a specific activity does not, or an activity might be legitimate but the organisation might lack it, or both organisation and activity have sufficient legitimacy for the social license to root. It is only in this third variation that I believe social license can exist. I also dismiss cases where both activity and organisation are illegitimate (the fourth permutation) and leave this to the criminologists to discuss.

Anyway, the fourth chapter of my book sets out 10 things any business should do to try and improve its legitimacy – the first seven relate to the business itself, and the other three to the activity in question.

Things that help make a business legitimate:

1.  The provision of real value both in financial and social terms

2. Understanding the true social impacts of the business

3.  The opportunity cost of the company existing in social terms

4.  The efficiency of the business and the effectiveness of its management

5.  Company structure, governance and accountability

6.  Understanding the different needs of shareholders, stakeholders and rights-holders

7.   Paying enough tax and in the right place

And in relation to specific activity:

8.   Adequate due diligence: prevention and mitigation

9.  The provision of adequate remedies

10.  Appropriate levels of transparency and disclosure

Obviously I go into a bit more detail in the book itself but I am interested to hear what might be missing from the list?

 

 

 

 

 

5 thoughts on “Legitimacy – 10 things any business should do”

    1. Jose – thanks for the question. My meaning here is the wider tax justice debate and a particular focus on issues such as “transfer pricing” – the ability of multinationals to recharge costs internally and to post profits in low tax regimes. This has received a lot of attention in the New York Times over the past two years, and also drew the attention of UK Prime Minister earlier this year when he commented on the low amounts of tax that Starbucks and other companies were paying in the UK.

  1. Re : And in relation to specific activity

    Different models have different social inclusion IN the process of doing business. Google and other proponents of open source have found that many heads can progress business activity in the direction that the company is leading. Shared responsibility and shared innovation is a relatively new concept in business. Many companies are making profit, not by a lack of transparency but through other models of income generation associated with the primary business activity. In this way, collaboration, which is priceless, becomes the norm. Transparency breeds honesty.

    Jen

    1. Dear Jen – I too find the symbiosis between shared innovation and shared responsibility an interesting one. In social license terms, this is tested for Google and others, when governments make stipulations in the name of protecting consumers (such as the recent ‘right to be forgotten’ ruling in Europe), or their own national security demands (Snowden etc). Transparency is indeed a fundamental underpinning concept and interesting therefore to see how it aligns with growing demands for the right to privacy. These are not opposites, but the relationship between transparency and privacy still needs to be better understood by ISPs and others as we move forward. Cheers John

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